Lollipop, Lollipop

By Tim Dewald - AuGres

Posted 12/10/08

Have you ever seen a child throw a temper tantrum to get what they want? I’m sure at this time of year most of us have. The child may not even know they want something, like a lollypop, but once they see it (especially if others are getting one) they need it.

Have you noticed how the automakers are acting? We didn’t hear how bad the finances were until our government opened up the purse and pulled out the big red “bailout” lollypop for the banking industry. Then the big three started holding their collective breath to get a big lollypop.

I expect they too will get a loan or bailout from tax money. I guess it’s because they can’t get loans from the banks … the ones we just infused with over $700 billion. I think before we go ahead and print money we don’t have, we must understand why the banks won’t back these companies – if that’s true. If it’s the they are just too great of a risk – then why should the American people? I doubt the American people will get a return on the last big government investment (the banks).

Here’s the bigger issue – competing with a labor market as large as China’s 803 million people, with an average wage of .57 cents per hour, compared to America’s 151 million person labor pool and the average UAW worker making $75 an hour in wages and benefits. It’s not hard to see the bailout would be the same as bailing out a toy manufacturer, clothing manufacturer or anything else China now makes.

I have no idea how you compete with such a difference in labor costs. I do know that people are people, by that I mean quality can be made anywhere. That being said I also know the concessions that’ll be taken from the UAW workers will not level the playing field.

Overall, I think we will see a leveling off of the world economy. I don’t think America’s standard of living will be as low as India, but I expect that once the world economy levels off, the world will be something like Mexico. This would not be great for America but for the majority of the world, a vast improvement.